Brexit Signals Difficult Times Ahead: More Questions Than Answers After May Speech

Today’s speech by British Prime Minister Theresa May did not fully succeed in shedding clarity about Brexit by outlining a definite no to membership in the single market.

In light of May’s warning vis-à-vis a punitive deal by EU member states and the “calamitous” consequences for Europe, former Danish Prime Minister and NATO Secretary General, Anders Fogh Rasmussen, founder and Chairman of Rasmussen Global says:

– “Today’s speech by Theresa May raises more questions than it answers. There are significant geopolitical implications not just for Britain but for the EU as well. Northern European countries like Denmark will need to navigate between their economic ties to Continental Europe and their belonging to the EU, and their natural alignment with the UK on issues like trade. It could pose a real dilemma for those countries.”

The British Prime Minister spelled out twelve detailed objectives, including as much access to the single market as possible, immigration control, and cooperation with the EU on defense and fighting terrorism.

Specifically on the latter, Mr. Rasmussen gives an important warning:

– “Security should not become collateral damage in what may be a hard Brexit. Given UK’s capabilities, its efforts in combating terrorism and strong stance on Russia, it would be a real lose-lose if both the EU and the UK allow security to get caught in the crossfire.”

With a view towards the new Trump administration in the U.S., Mr. Rasmussen is cautious vis-à-vis the way in which Trump has injected himself into the Brexit debate:

– “With Trump’s interest in the Brexit, what we are very likely to see is not a negotiation between EU27 and the UK but rather a 27+1+1. It is both an opportunity for all or a recipe for disaster.”

Former British Ambassador to the EU and U.S., and former National Security Adviser, Sir Nigel Sheinwald, Senior Advisor at Rasmussen Global, is also critical about the UK strategy towards carrying this through, saying:

– “Mrs. May’s speech today added little to our understanding of her negotiating strategy.  It’s been obvious since she took office that she wanted Britain to leave the single market and construct a bespoke new relationship with the EU.

British business and the City will be relieved to have some more detail today from Mrs. May, but are still apprehensive because we will be doing away with the passport for financial services and other single market tools without any clear replacement.  Some are bound to continue with contingency plans to move parts of their business from the UK while the situation remains so unclear”.

As part of her strategy, Mrs. May made it clear that the UK will either seek a new customs agreement or become an “associate member” of the customs union. It would seek tariff free trade but without being bound by external tariffs.

The Prime Minister warned against living in a “political purgatory” and therefore needing an agreement before the end of Article 50, and she spoke of a phased process of implementation to avoid a disruptive cliff edge. To that, Sir Nigel Scheinwald remarks:

– “Today’s speech still leaves us with two credible scenarios for Brexit.  The first is a disorderly, disagreed Brexit, with gaps impossible to bridge on both the divorce terms and new relationship, and an improbable two-year window to settle everything.  The second is a realistic timetable – two years for Article 50, a transitional period while the new relationship is worked through, and a final deal some years later. Ideally we would stay in the Customs Union during that interim phase; and there could be standstill in terms of single market access or a phased transition rather a cliff edge, as Mrs. May hinted. I hope the British Government is moving hesitantly towards the second, and will show sufficient flexibility and focus on our economy’s long term needs to avoid the first.

But there are two fundamental flaws in the Government’s approach.  First, it remains willfully optimistic about the timetable for the negotiations, and still has not faced up to the difficulty of seeking the highest level of access to the European market for our goods and services, while prioritizing new controls on immigration and an end to ECJ jurisdiction.  Mrs. May gives us no clue how this conflict can be managed, and is still unwilling to embrace the need for a proper transitional period between Exit and the conclusion of a deal on the future relationship between Britain and the EU.

Second, Mrs. May fails to recognize that British trade access to, and political influence in, the rest of Europe will remain central to the way we are seen in the rest of the world. ‘Global Britain’ will remain an empty slogan if we end up with a harsh or disorderly Brexit which leaves our relationship with our biggest market and long-standing political partners in tatters.  Mrs. May rightly talked today about the political values we share with our European allies.  That includes keeping international trade open, a strong NATO,  a determined and principled resistance to Russian aggression in Eastern Europe and interference in our countries – issues on which our government needs to work with EU partners to moderate the incoming U.S. President’s policies. While Mr. Trump’s positive interest in the UK is to be welcomed, the May Government need to be careful to think about Britain’s long term interests.“

Sir Nigel Scheinwald concludes that the Brexit process signals difficult times ahead:

– “It seems unlikely that the rest of the EU will find enough in today’s speech to make them adopt a more constructive approach to the negotiations.  The elections in several EU countries have contributed to a hardening of positions towards the UK.”

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